Cost Efficient Dispute Resolution

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Proton Energy Group SA v Public Co Orlen Lietuva

[2013] EWHC 334 (Comm)

Clear report crucial to outcome

Summary

It was inappropriate to grant a company summary judgment on its claim for repudiatory breach because there was an issue to be tried as to whether a legally binding contract had been concluded between them. The Court could and would look at expert evidence as to how contracts were concluded in the crude oil market to decide how and when parties would consider themselves bound.

The Facts

Proton (“P”) applied for summary judgment on its claim for repudiatory breaches of contract against Public Co. Orlen (“O”). P had made what was described as a "firm offer" on 14 June 2012 to sell O crude oil. Email correspondence ensued between the parties, culminating in a one-word email from O on 20 June 2012, which simply said "confirmed". P sent O a draft sale contract the same day. On 27 June 2012, P sent O a revised draft contract. On 29 June 2012 O withdrew from the negotiations and refused the cargo. P said that there was a contract formed on either 14 June or 27 June 2012 and O had committed a repudiatory breach.

P applied for summary judgment on the basis that the alleged contract was formed on 14 or 27 June 2012. O called an expert, Mr Travers who gave evidence that O's “confirmed” email would not have been understood by reasonable market participants in the oil trading industry to have created a binding contract.

The judge that the relevant question was whether the parties were agreed on all the terms that they objectively regarded as essential for the formation of legally binding relations. There were several indications in the exchanges between the parties after 14 June 2012 which suggested that O did not consider itself bound. Whether two parties had entered into a legally binding contract depended in large part upon an objective evaluation of what was communicated between them by words and conduct.

The judge admitted Mr Traver’s expert evidence as to how the oil market operated and whether the parties would consider themselves bound. The parties' objective intentions as expressed to each other could and should be judged on context and against the relevant background. Mr Traver’s evidence would genuinely assist the trial judge in determining whether a binding contract was concluded on 14 June 2012, and the importance and significance of it meant that it should not be shut out in the instant application.

Comment

This is an interesting case for a number of reasons. First, although it is often said that experts cannot deal with issues of law, which are solely for the judge, the modern approach to contractual construction – which places emphasis on the all the background facts, and interprets what the parties have said and done against that backdrop – means that there is plenty of room for experts, where appropriate, to opine on the relevant background and the context that the parties will be taken to have known about. That can be particularly useful to the court when the relevant background is not straightforward, and where as here there are significant commercial and technical issues that form part of the context as to whether (for example) an email saying “confirmed” really meant that there was a binding contract. Often expert evidence about the relevant context will be more persuasive than that from the lay witnesses, even if they are suitably qualified.

A second point is that Mr Travers appears to have produced an interim, or preliminary report to help O see off the summary judgment application. Such reports, where relevant, will obviously often be produced quickly and under pressure in order to meet a specific application. From the judge’s judgment, Mr Travers seems to have produced a good, strong, focused and tightly reasoned report in short order to assist the Court to understand the mechanics of the oil trade industry, which the judge found admissible and indeed helpful. For example, the judge appears to have been able to quickly distil Mr Travers’ report down into 8 propositions (see para 27 of the judgment). A clear report, delivered on time and dealing directly with the nub of the case appears to have been crucial to the outcome of the application.